Guess Where the Latest Travel Start-Up Is From

Yamsafer is the latest entrant in the ever-changing and exciting travel space, offering price-competitive hotel booking bundled with tickets for popular local events. And it launched far from Silicon Valley. Another story on the rise of the next New York City start-up?

Not exactly. Try Ramallah.

“Palestine is often only seen through the prism of conflict and occupation — both of which are real and stifling,” notes Saed Nashef, General Partner with globally-funded, Ramallah-based Sadara Ventures. “At the same time, Palestine has talent and economic opportunity.” He is thrilled to lead Yamsafer’s A round.

Born and bred in East Jerusalem, Nashef moved to the United States in 1988 and was an engineer with Microsoft in Redmond for six years before becoming involved in several start-ups in the Seattle area. In 2007 he decided to return home. “I saw an opportunity to have noticeable impact on the development of a knowledge-based economy in Palestine, while generating healthy returns on investments. Sadara provided a great platform for that.”

Saed Nashef

Raising a fund that primarily invests in early-stage Palestinian tech start-ups was, one might say, a contrarian play. But Sadara was able to raise a $30 million fund from the likes of the Google Foundation, Cisco, the George Soros Economic Development Fund, the Skoll Foundation and the European Investment Bank, among others. “Most of what we’re seeing locally is consumer Internet and mobile apps,” Nashef notes. “While a lot of investment opportunity will be in the commercialization of technology for local markets, or adapting proven models from more developed markets for local consumption, I expect that innovative IP-based opportunities are just around the corner.”

Yamsafer was founded in September of last year by local entrepreneurs Faris Zaher, Seri Abdelhadi and Sameh Alfar. They recognized that the MENA region has been one of the world’s fastest-growing inbound and outbound travel markets for the past decade, compounding at a steady 10 percent even during political uncertainty. Despite exogenous shocks to inbound demand caused by the Arab Spring, a steady rise in the number of intra-regional travelers has created an opportunity for local online travel agencies that provide quality Arabic content and effectively acquire local customers. Added to these factors, the team made this an easy bet for Nashef. “They are focused, passionate and execution-oriented. They have a proven model for regional growth — and these guys have bootstrapped for a year and have learned a ton about the space. It has all the right ingredients to become a premier online hotel-booking site for the Middle East.”

Faris Zaher

Zaher, the company’s CEO and co-founder, is ecstatic. “We are thrilled to have found in Sadara a venture fund that shares our vision and that is capable of adding significant value to the Company,” he noted. “With this round of investment we plan to scale our technology and migrate it to mobile platforms, expand customer acquisition efforts and strengthen ties with hoteliers to increase occupancy rates and make regional travel even more affordable,” he said.

Yamsafer is the first Palestinian company to secure an early-stage venture capital investment. In fact, most Middle East start-ups have much smaller rounds as relative cost advantages — star local software engineers, for example, are often a fifth of the average cost for the same talent in Silicon Valley — require less of an infusion. Nashef told me that when one finds the right team with the right idea, a little audacity can go a long way. “Our strategy is to invest in a few (8 to 10) start-ups with great potential, and work closely with them to build great companies that can create real value. We want our entrepreneurs to focus on building the business, and not have to worry about fundraising during critical stages of the company’s development.”

In recent years, there has been increased hope that the highly aid-dependent Palestinian economy can be invigorated by means of a competitive ICT sector. Many local Internet entrepreneurs have set their sights on succeeding in regional and global markets through the export of proprietary content and services. Nashef concedes, however, that the political conflicts will continue to depress the full opportunity in Ramallah’s start-ups. “Our greatest potential can be achieved only if there is parallel progress in both the political and the economic tracks,” he cautions.

Christopher M. Schroeder (@cmschroed) is a Washington, D.C.- and New York-based entrepreneur, venture investor and former CEO of the online content and social platform start-up healthcentral.com, which he sold last January. He is writing a book about tech start-ups in the Middle East due Spring 2013.

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